Global Market Update
• The benchmark 10-year UST note yield increased marginally by 1 bps to 3.04 on Friday (08/26/22).
• Meanwhile the benchmark 2-year UST note yield rose by 3 bps to 3.40% at the same time.
• The spread between 2/10-year UST note yield widened to -36 bps from previously -34 bps.
• US stock indices dropped significantly. DJI and S&P 500 fell 3.03% and 3.37% respectively, whilst Nasdaq Composite lost 3.94%.
• Market moved after Fed’s Chair Powell made a statement on future policy path. • Powell said higher interest rate is needed to tame inflation and become CB priority although it would cost pain to households and businesses.
• Furthermore, Powell stated that failure to restore price stability would mean far greater pain.
• At the annual Jackson Hole Symposium Powell also said Fed is moving policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2% target.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) slightly unchanged at 7.05% on Friday (08/26/22).
• The IDR strengthened against USD and was closed at IDR14,818/USD on Friday (vs IDR14,825/USD on Thursday).
• Indonesia’s 5-year CDS slightly declined to 102.06 bps on Friday (vs 102.70 bps on Thursday).
• The possibility of government to adjust subsidized fuel pricing will be inflationary. For every 1% increase in subsidized fuel price will add inflation by 0.09%.
• Higher inflation would only cause higher interest rates and reducing the value of bonds propping up higher yields.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 7.00-7.20% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0042, FR0047, FR0052, FR0085, FR0091 and FR0096.
Disclaimer On
